Bone formation is a continuous process that is initiated during fetal development and persists in adults in the form of bone regeneration and remodeling. These latter two aspects of bone formation are clearly influenced by the mechanical environment. In this study we tested the hypothesis that alterations in the mechanical environment regulate the program of mesenchymal cell differentiation, and thus the formation of a cartilage or bony callus, at the site of injury. As a first step in testing this hypothesis we produced stabilized and non‐stabilized tibial fractures in a mouse model, then used molecular and cellular methods to examine the stage of healing. Using the “molecular map” of the fracture callus, we divided our analyzes into three phases of fracture healing: the inflammatory or initial phase of healing, the soft callus or intermediate stage, and the hard callus stage. Our results show that indian hedgehog(ihh), which regulates aspects of chondrocyte maturation during fetal and early postnatal skeletogenesis, was expressed earlier in an non‐stabilized fracture callus as compared to a stabilized callus, ihh persisted in the non‐stabilized fracture whereas its expression was down‐regulated in the stabilized bone. IHH exerts its effects on chondrocyte maturation through a feedback loop that may involve bone morphogenetic protein 6 [bmp6; (S. Pathi, J.B. Rutenberg, R.L. Johnson, A. Vortkamp, Developmental Biology 209 (1999) 239–253)] and the transcription factor gli3, bmp6 and gli3 were re‐induced in domain adjacent to the ihh‐positive cells during the soft and hard callus stages of healing. Thus, stabilizing the fracture, which circumvents or decreases the cartilaginous phase of bone repair, correlates with a decrease in ihh signaling in the fracture callus. Collectively, our results illustrate that the ihh signaling pathway participates in fracture repair, and that the mechanical environment affects the temporal induction of ihh, bmp6 and gli3. These data support the hypothesis that mechanical influences affect mesenchymal cell differentiation to bone. © 2001 Orthopaedic Research Society. Published by Elsevier Science Ltd. All rights reserved.